I was meant to start yesterday on the Today programme, discussing whether or not HMRC should have an input into the honours system on a traffic light basis to indicate whether or not a supposed recipient's tax affairs had green, amber or red reputational risk. And then they got Vince Cable instead. Which meant I had a little more time in bed before a long day dedicated to other issues. But I'll explain here what I had outlined I'd say, which was more complex than Vince's message.
He said HMRC was right to do this. And I agree, they are right to assist. But I made additional points.
The first was that we don't give most awards for paying tax. We give them for sporting, artistic and charitable achievements. Personally, I have little interest In the system as it smacks of old-fashioned patronage, let alone Empire, but we have it. And let's recognise that in these sectors it may have some use (but the awards need to be renamed, and have done for a very long time).
Second, awards come in two sorts. One is just the gong. The other has influence. Most awards are just of the first type. Sir Rod Stewart did not get influence over the UK government for 45 years of singing Maggie May. The title is an honour, and no more. The vast majority of awards are.
For these people I suggest the criteria should be very diffferent to that which should be used to those who might have influence recognised or enhanced by an award. These are those who have power in industry. Or those who secure power in government as a result of the rewards, whether as senior civil servants, or as appointees to public bodies (many of whom get awards for doing so, which suggests prior vetting before the appointment using the same traffic light system would be wise). And then there are those who can legislate as members of the House of Lords as a result of appointment.
I think the criteria should be different. In the former category of simple awards for excellence evidence of tax fraud, or use of offshore as a part of their arrangements, over either of which they would clearly have been required to make a personal choice over which they could not claim to have lacked awareness, should preclude an honour.
But for this group - many of whom will have little knowledge of finance or even in some cases their own financial affairs, which may well be run by an agent for them - participation in a packaged tax avoidance scheme that was sold to them and which they were advised to take, quite probably with little understanding of the risks , seems to me to be a wholly inappropriate basis for excluding a person from an honour. They may have chosen their advisers unwisely in this case - but vast numbers of advisers were engaged in such sales and I think it simply wrong to penalise a person who acted on professional advice. You might as well penalise the victims of pension mis-selling for having been daft enough to put their money into Equitable Life, which was once so many pension professional's favourite company. The fact is that this group engaged others to do their due diligence for them, and were failed by those who did that due diligence. I am not sure they should suffer a second time as a result. For this group then only a red warning - for fraud or tax haven abuse - should be a block.
But that brings me to the second group - which is those who should know better. No one getting a reward for business activity can claim they cannot do their own due diligence. Or that they are not responsible for the tax affairs of their companies. Or its offshore subsidiaries. Or the pre-packaged tax avoidance that they buy.
And no one who goes to the Lords can have any excuse for undermining the state of which they are to be a part.
These people have to be held accountable for what they do. An amber award does, in that case, mean a block in my opinion. And that should include those appointed to regulatory positions and high civil service appointments as well as advisory committees.
But does this mean anyone should be blocked automatically even if their own affairs get a green? My answer to that is that those who have been associated with selling tax avoidance should be blocked, altogether. This was the key message that I wanted to get across on the Today programme. It is not the users of tax avoidance who were in most cases the people at fault. Most were ill-advised, although I accept some were gullible and maybe greedy. But they could not have been so without the aid of those who created the schemes. And it is those schemes creators and vendors - the tax avoidance dealers - who should be barred now.
Who are they? The partners, past and present, of most large firms of lawyers and accountants, in the main. And a partner in any professional firm engaged in a tax haven where it cannot be shown that the vast majority of their practice is to serve a local community's needs should also meet this criterion. These are the people who really should be sanctioned now, and barred from holding office, including (most especially) on the Board of HMRC. There is no room for the purveyors of tax abuse in UK public life. And they are the people who really need to be sanctioned for their activities.
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I’m surprised you’d even consider wasting valuable bed-time to contribute to such a topic. Like so many other feudal UK institutions the honours system doesn’t need reforming but radically redesigned for the 21st century. Bizarrely it’s an issue on which the Guardian and the Mail broadly agree – so it must be right! https://www.theguardian.com/media/greenslade/2016/aug/04/the-daily-mail-and-the-guardian-agree-honours-system-is-a-disgrace.
I think you will note I chose to go beyond the honours system
That was why I would have taken part
The debate about the honours system is a microcosm of the debate on whether democratic socialism has been a success in places where it has been tried, and when it hasn’t worked, it wasn’t because of bad intent, it’s just that it wasn’t done right.
The neoliberal view on honours which is wrong, but does need to be understood, is that respect, recognition and reward are gained through the free market which has an array of honours, ranging from the Oscars, BAFTAs, share awards, football contracts, to Olympic medals and lottery funding. Quite why the government needs to come in on top of this using people paid under threat of court to decide these people additionally need an OBE is a mystery to the neoliberal mind set.
The progressive view is that there is a place for an honours system, but it is in disrepute because it isn’t being done right.
IMO the blame cannon should be pointed at both otherwise all you do is encourage rich people to be as uninvolved with their finances as possible, or at least to establish plausible deniability. which justs gives more power to the snakes coming up with the scheme. After all the snakes are just embodying capitalism, if they can get a better ROI then the other snakes then that is where the money will end up. The best way to discourage it is too have consequences for all involved.
I am not sure
Just as on drugs (and that is a complex issue) the issue is not really the end user – although they have liability for the consequences of their actions – but with the supply chain
I would always start with the suppliers
And I have said so for a long time
[…] then, as they have developed their thinking, but the essence of what it says is at the core of my earlier blog on tax and the UK honours system and so it remains […]
Don’t you need to be more specific here or are you suggesting legal avoidance should preclude. I can certainly see a case for failed avoidance to be a block eg those ridiculous film partnership schemes but as we know avoidance encompasses many things from making pension contributions through entrepreneurs relief to offshore schemes. Perhaps you mean aggressive avoidance at the aggressive end of the scale?
Tax compliance is seeking to pay the right amount of tax (but no more) in the right place at the right time where right means that the economic substance of the transactions undertaken coincides with the place and form in which they are reported for taxation purposes.
Pension arrangements gove tax relief
Like being alive affords most people a personal allowance
If the law specifically permits something it can never be tax avoidance
To claim anything else is sophistry at best. I could be less subtle
It’s very much a fact that some human beings will use “honouring” as a way to gain power, hold onto it, and wield it undemocratically. An understanding of the history of China’s Communist Party rule reveals this very clearly. Firstly, there was the “Thought of Chairman Mao” and his Little Red Book bulled up to be the bee’s knees when it was largely gobbleydegook and masked Mao’s economic illiteracy. After Mao along comes Deng Xiaoping who at least had some inkling of how economic systems should work but even he permitted the Party to broadcast the instruction that after the economic calamity of Chairman Mao there is no alternative to “The Thought of Deng Xiaoping” and it must be followed!
Currently the same game is being played in the UK. The people voted for Brexit therefore it must be honoured because “the people” have the monopoly on wisdom! Those pushing this line of “thought” repeatedly use this as a mantra to refuse to explain in any detail how an economically feasible trading relationship will replace the existing one and one which won’t damage the economy.
Very perceptive, in my opinion
Excellent and very well put Richard my wholesome support.
Showing and paying for the substance of the transaction ie moral and values of integrity are what justice and good governance is about. Correcting mistakes when they are shown up with particular care for legislators and highly relevant to positions of importance and influence in HMRC.
I hope this suggestion gets cross party support including the Conservatives Ministers as it would provide faith and trust in taxpayers to continue. Much like being a listed PLC creates an incentive for declarable taxable profits and earnings whilst taking a PLC company private makes an incentive to pay nothing back into the system.
I often disagree with your posts, not in this case. I completely agree. I wonder what you think about honouring senior politicians in the Isle of Man and Channel Islands?
Honours for Crown Dependencies and BoT officials is hideously wrong
Doing away with the honours system would be an honourable thing to do to be honest.
“Doing away with the honours system would be an honourable thing to do to be honest.”
I’m not entirely sure about that, Pilgrim.
I know the honours system we have is a shambles, but the idea of honouring a person for a contribution to the good of society seems to me to be a thoroughly good idea; a recognition of public service without recourse to pecuniary advantage would be a good thing wouldn’t it ?
Where we go wrong to some extent is in rewarding some of those who are over-rewarded already by their success in their chosen field of endeavour.
Somebody gets an olympic gold medal and they deserve a gong aswell….what’s that about ? Somebody else gets paid big salary and pension for doing a job of work and gets a gong aswell ? Why ?
I have to admit that I don’t have much idea how the system would be improved in practice. But at bottom it’s the selection and approval process that needs looking at I think.
Richard, thank you for the interesting point about investors in Equitable Life pension arrangements (like me, through civil service AVCs) being in the same position as David Beckham as regards their due diligence on advisers. Respectfully I disagree. I do not expect, want or deserve to get an honour as I am not motivated by the monarchical system that uses these baubles to motivate its adherents. Those who do should note the lesson that successfully covering up your misdemeanours and high crimes is a crucial part of the honours system. How does one do that? Well I suggest that David Beckham should have a word with Sir Richard Branson who may well be able to give him a few pointers.